he energy transition will require a shift in fnance, involving both public and despite the surplus of fossil fuels relative to GHG targets, private actors. Where capital is fowing provides an indicator of whether Carbon Tracker estimates $674bilion was ploughed Tthe markets are taking climate change policy and impacts seriously. into fnding and developing more reserves last year. This indicates that over the next decade we have an Born out of the desire for information, Carbon Tracker sought to fnd out how many opportunity to divert around $7trillion in capital from degrees of warming were embedded in the fossil fuel reserves of companies listed being wasted in reserves that will become stranded on the world’s stock exchanges. The answer was stark. By making comparisons to assets in a 2°C world. This cash could be returned to carbon budgets – the total amount of CO emissions permitted to 2050 to remain shareholders as dividends or invested in low carbon 2 within a given temperature range – Carbon Tracker’s research revealed 60-80% of opportunities which will create more value. listed fossil fuel reserves need to remain in the ground to keep global warming to the internationally agreed level of 2°C. There are several ways in which this capital can be diverted. This massive overshoot in terms of carbon reserves has been described as a major 1. Investors can reallocate capital away from carbon contradiction sitting on the fnancial markets by Lord Stern. The fndings have since intensive activities, to reduce their exposure to been confrmed by the IEA’s World Energy Outlook 2012 which concluded two thirds climate risk. of fossil fuel reserves are ‘unburnable’. Unfortunately carbon capture and storage 2. Companies can cancel new exploration and (CCS) cannot extend the carbon budget signifcantly before 2050, even if the IEA’s development projects. idealised scenario were to be funded and developed. Worryingly, there is little room for 3. Governments can provide policy certainty to support error, with very limited headroom before 3°C of warming results. the development of low carbon energy, and remove subsidies which continue to promote established Wasted capital hydrocarbons. It has been recognised that signifcant capital will be required to develop the low carbon infrastructure and technology essential for achieving emissions targets. Yet